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HomeMy WebLinkAboutStaff Report 112-06TO: FROM: DATE: TITLE: HONORABLE CITY COUNCIL CITY MANAGER JANUARY 17, 2006 DEPARTMENT: UTILITIES CMR: 112:06 WITHDRAWAL OF CITY OF ROSEVILLE FROM NORTHERN CALIFORNIA POWER AGENCY POOLING AGREEMENT This is an informational report. No Council action is required. BACKGROUND The City of Palo Alto participates in the Northern California Power Agency (NCPA) electric power pool where loads and resources are pooled to achieve economies of scale. At present the pool consists of 11 members and operates under the terms of the September 1993 NCPA Pooling Agreelnent (CMR: 477:92). NCPA’s cost to operate the pool and provide related services in FY 05-06 is budgeted at $7.3 million of which the City’s share is $1.7 million. The City’s participation in the power pool has provided numerous benefits including achieving economies of scale of operation, pooling benefits associated with the City’s Western Area Power Administration contract, pooling of load to avoid peak demand based charges, and transacting within the pool and avoiding volatile real time prices. The City also obtains services from NCPA under the August 2002 Scheduling Coordinator Program Agreement (CMR: 298:02) for dispatching and scheduling load and resources with the California Independent Systems Operator (ISO). The provision of this service costs NCPA $5.4 million, of which Palo Alto’s allocation is $1 million. The City of Roseville, along with the City of Palo Alto, was one of the original ten NCPA members forming the NCPA power pool. Roseville now indicates that the benefits it obtains from the pool have decreased due to its move to the Western sub-Contro! Area in January 2005 and due to the resmacturing of the long-term Western energy contract. Additionally, Roseville is rapidly growing and has a large power plant coming online within its boundaries in 2007. These seem to be the reasons that prompted Roseville to examine alternative an’angements, and have now resulted in its official notice of withdrawal from the NCPA Pooling Agreement. Roseville will continue to participate in NCPA’s legislative, regulatory and resource acquisition efforts. DISCUSSION The Roseville City Council voted to approve the staff recommendation to withdraw and Roseville has formally notified NCPA of this decision (Attachment A). Roseville’s pool CMR:112:06 Page 1 of 2 withdrawal is to be effective as of July 1, 2006. NCPA staff is now in a consultative process with members to accommodate and implement Roseville’s pool withdrawal (Attachment B). Staff is studying the ilnpact ofRoseville’s withdrawal from the pool on the Ciw. At a n~inimum, the withdrawal of the pool’s largest member will reduce the economies of scale associated with NCPA pool operations. Roseville’s withdrawal from NCPA is limited to NCPA pool operations. It will continue to participate fully in NCPA power plant operations and joint action efforts related to regulatory and legislative efforts. Staff has been planning for this possibility for over six months, by constantly engaging NCPA staff to develop contingency plans in the event of such withdrawal and loss of financial contribution to NCPA’s fixed overheads. NCPA staff has undertaken numerous efforts to attract new members, expand se~wice offerings, and contain costs. The results of such efforts include the decision by Bay Area Rapid Transit (BART) to join NCPA as a full member. The Port of Oakland became a pool member in August 2003 and the expansion of services to BART is anticipated starting 7/1/2006. Several other NCPA initiatives are in pro~ess. The potential increased cost to the City will be included in the budget. RESOURCE IMPACT Allocation of NCPA fixed costs to a fewer number of members will likely increase Palo Alto’s cost allocation share within the pool and the ISO scheduling coordinator program. The extent of this increase is uncertain at this time. Very preliminary estimates are that the cost increase to the City could be between $500,000 and $700,000, but could be lower depending on other NCPA initiatives. The City’s FY 06-07 budget request will include a $700,000 increase to cover this potential contingency. Staff will be analyzing the cost competitiveness ofNCPA se~wice levels to the City in the coming months as NCPA restructures around Roseville’s withdrawal. NEXT STEPS Staff will continue to update the UAC and Council of new developments and potential economic impacts on NCPA generally and Palo Alto specifically. ATTACHMENTS A. City of Roseville Notice of withdrawal from NCPA Pooling Agreement dated 12/5/05 B. Letter from NCPA staff acknowledging notice of withdrawal dated 12/8/05 PREPARED BY: Shiva Swaminathan, Senior Resource Planner DEPARTMENT HEAD: CITY MANAGER: ~o r’~o f~~ s t~tiv e~S:Di c e s Assistant City Manager CMR: 112:06 Page 2 of 2 ¢ib/ Manager 31 I Vernon S~reel ,...ah,arn~a 95678-2649Raseviiie, " ": ’ December 5, 2005 CMR:112:06 Att. A 1@. Bob Marshall General Manager Plumes-Sierra Rural Electric Co-op. 73233 Highway 70 Portola, CA 96i 22 Ms. Debra Kurita City Manager Alameda Power and Tdecom 2263 Santa Clara Avenue, Room 320 Alameda, CA 04501 Mr. Frank Benest City Manager City of Polo Alto P.O. Box 10250 MS C3 Paio Alto, Ca 94303 Mr. Jack Ftota ,..,ity Manager Cily of Gridtey 685 Kentucky Street Gridley, Ca 9594B Mr. Jerry Bridges Executive Director Port of Oakland 530 Water Streel Oakland, Ca 94607 Mr. Chat Wystepek City I~1anager Cily of Healdsburg 401 Grove St Healdsburg, CA 95448 tvls. Candance Horsley Mr. Blair King Mr. Jim Pope City Manager City Manager General Manager City of Ukiah City of Lodi NCPA 300 Seminap../Avenue 221 W. Pine Street 180 Cirby Way Ukiah. Ca 95482 P.O. Box 3@6 Rosevi’.fe, CA 95678 Lodi, Ca 95241 Mr. Randy Cagle Mr. Gary Keefe City Administrator Cit.~’ Manager City of Biggs City of Lompac P.O. Box 307 i00 CMc Center Plaza Biggs. Ca 95917 Lompac, Ca 93436 Re: City of Roseville Notice of Withdrawal from NCPA Pooling Agreement Dear Ciiy Managers, General Managers, Cib£ Administrator and Executive Director: Pursuant lo Article I5, Seclion 2 o, :h~ Northern California Power Agency ("NCPA") Pooling Agreement, the Cily of Roseville ("Roseville") subm~ tnb notice of v~iti~drav;al from the Poolina Agreement dfective June u0, .-u06. I I~ave atlached for your informalion the Rosevilla Cily Council Resolution authorizing me to send this notice. Roseville values its membership in NCPA and plans to continue participaling with NCPA Members particularly in the area of power generation and legislative and regulatory representation where such activities are mutually beneficial. We look forward to ;vorking with your staff iowards a smooth transilion to effectuate this w thdrawal. Please contact Mr. Tom Habashi at (91 B) 774-5602 if you have any queslions regard ng this matter. Sincerely, / / . W. Craig Robinson ’ Roeeville Cih., [,aana.~er co:NCPA Commissioners 9i6.774.5362 ~ Fax 9i6.774.5485 o TDD 9i6.774.5220 ~’ v.,,,v,.v.ose.,,ille.cc.us RF~OLUTION NO. o~-sg; AUTHORIZING WITIIDRAWAL FROM THE NORTHERN CALIFORNLA POWER AGENCY POOLING AGREEMENT V~-I-IEREAS, r_he City of Rosevil!e and the Northern California Power Agency ("NCPA’) have entered into a Pooling Agreement, dated December 22, 1993; and WHEREAS, at the September 2004 joint mee’dng of the City Council and the Roseville Public Utiliti.es Commission, Roseville Electric stuff d~cribed the upcmming changes to electric utility operations; and V~qi-EREAS, due to these changes and for t_he reasons discussed in the accompanying staff report, staff recommends withdrawal from the Northern California Power Agency Pooling Agreement; and WHEREAS, the Pooling Agreement allows for a party thereto to withdraw from the Pooling Agreement upon minimum 6 months written notice in advance of the effective date of such withdrawal; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Roseville that the City Manager is hereby authorized to issue a notice to withdraw from the Northern Caliform’.’a Power Agency Pooling Agreement and that withdrawal be effective July 1, 9006. of PASSED AND ADOPTED by the Council of the City of Roseville this 16__~ day ~love~t~" ,20_~, by the following vote on roll call: AYES COUNCtLMEMttERS:Rockholm, Gray, All.d, Roccucci, C~arbolino NOES COUXCCILMEMBERS:None ABSENT COUNCILMEMBERS:~ne ATTEST: City Clerk December "~ 2005 2090 Hi’,itop Circle Roseville, CA 95747 01lice (9i6) 774-5600 FAX {915) 784-3797 TDD (916) 774-5220 wwv.,~.R osevilleElectric.org Mr. Jim Pope General Manager Northern Call f’ornia Power Agency 180 Cirb7 Way Roseville, Ca 95678 Re: Notice .....to \Vithdraw fTOm NCPA Pooling k,q-eement= Dear Jim: Attached for your information is the City of Roseville~s notice to withdraw from the NCI?A Pooling Agreement effective June 30~ 2006. As a consequence of this decision, . we do not anticipate changing our ongoing participation in Generation Sea, ices or Legislative, Regulatory and Western Representation. In addition, we will continue to be a participant in the NCPA Project Third Phase Agreements, the Facilities Agreement and the Scheduling Coordination Prodam Agreement as these agreements may be affected by Roseville’s withdrawal from the Pooling Agreement. We are anticipating the effect ~hat our withdrawal will have on the allocation of SCALD and Power Management costs assigned to NCPA Members. These costs were the subject of the recent study performed by ZE Power Group, the current allocation of which was adopted at the December t, 2005 NCPA Commission meeting With reference to ?,our November 18, 2005 letter, we acknowledge that the study inputs and assumptions utilized in the adopted study will have to be reviewed and appropriately modified as a result of Roseville’s withdrawal from the Pooling Agreement However, we expect the cost causation principles that were embodied in the study’s methodology will be used in evaluating the effect ofRoseville’s withdrawal from the Pooling Agreement. We believe that equitable cost allocations of SCALD and Power Managemem functions will be addressed in a timely manner prior to the developmem of the FY0d-07 NCPA Budget. We understand some transition effort will be required on each of our parts to accommodate our withdrawal ~-om the Pool. We look forward to working with NCPA and NCPA Member staffin managing a smooth transition. As you know-, Roseville intends to utilize the services of ACES Power Marketing, LLC C~ACES’~) for the scheduling and dispatct~ services necessary to serve Roseville’s electric load in the Western Sub-Control :M-ea. I suggest our respective s~aff meet together with ACES to CMR~-112:06 Att. B December 8, 2005 Mr. W. Craig Robinson Rosevi!le Cib’ Manager 311 Vernon Street Rose-v-ille, CA 95678-2649 Mr. Tom Habashi ElecNc Utility Director Roseville Elecedc 2090 Hi!ltop Circle Roseville, CA 95747 180 Cirby Way Roseville. CA £5678 78i-3636 www.ncpa.com City of Rosexdtle’s December 5, 2005 Notice to NCPA to withdraw from the NCPA Pooling Agreement. Dear Craig and Tom: This letter is to ackq~owIedge receipt of Roseville’s notice to NCPA of Rose~4Ile’s intent to withdraw from participation in the NCPA Pooling A~eement effective June 30, 2006. Pri;or to any NCPA/Roseville staff level meetings, I intend to discuss Rosevi!le’s notice with NCPA’s legal staff and other affected NCPA members to receive input and guidance on how to accorrm~odate and implement Roseviile’s pool withdrawal. There are at least b~’o significant effort areas: 1) the technical, operational and communications matters affecting Rosevilte’s share of NCPA resources and how those resources ~vi11 be used, scheduled and set-tied between NCPA, Rose~dlle, and your new third parD’ service pro,,qder, along with any incurred one-time and ongoing costs associated with these aeti~dties; and 2) the resulting cost responsibilities to be allocated to Rose’~-iile afterthe effective date of withdrawal. On a practical note, I assume that the effective date of such transition commences after hour ending 24 on June 30, 2006 so that June 2006 settlements can be done on the basis of a fall month. I anticipate meeting with other affected NCPA members over the next several weeks. I wilt contact you during ear!?’ January to give you an update and make any necessary, meeting arrangements between our staffs. Please call me with any questions you may have. Best re~ / J.~)~ I-l[. POPE /~ineral Manager JHP:dd 1.71 NCPA Commissioners NCPA Uti!iw Directors